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Four Corners Power Plant

Four Corners Power Plant. ACC Open Meeting – November 18, 2010. Background Plant comprised of 5 generating units (2,100 MW). Units 1, 2 & 3 solely owned by APS Total of 560 MW Placed in service in 1963-1964 Units 4-5 jointly owned Each unit is 770 MW Participants:

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Four Corners Power Plant

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  1. Four Corners Power Plant ACC Open Meeting – November 18, 2010

  2. BackgroundPlant comprised of 5 generating units (2,100 MW) Units 1, 2 & 3 solely owned by APS • Total of 560 MW • Placed in service in 1963-1964 Units 4-5 jointly owned • Each unit is 770 MW • Participants: • Southern California Edison (SCE)* (48%) • Arizona Public Service (15%) • Public Service of New Mexico (13%) • Salt River Project (10%) • Tucson Electric Power (7%) • El Paso Electric (7%) • Placed in service in 1969-1970 739 MW 231 MW 200 MW 154 MW 108 MW 108 MW * SCE limited in ability to fund capital investment after 2011 is disallowed if “life extension” by virtue of CPUC May 2010 decision

  3. Challenges • Environmental Considerations • NOx and PM – BART compliance required mid 2016 (all FC units) • Ash – Implementation starting 2013 (all FC units) • Mercury – Compliance late 2014 (FC units 1-3) • Lease Renewal & Right-of-Way Agreement – Tribal Council vote expected soon • BHP contract renewal– negotiations underway • Ownership/Participant Considerations – Southern California Edison (“SCE”) must exit ownership of Units 4-5

  4. Environmental Considerations - BART • Issues • EPA will be requiring the installation of additional pollution controls at Four Corners for particulate and NOx to improve regional haze in Class I Areas • Status • On October 19, 2010, EPA published a proposed Regional Haze FIP • The proposed determination would require: • SCRs on Units 1-5 • Electrostatic Precipitators or Baghouses on Units 1-3 • Opacity limits for the stacks and on fugitive dust • Timing • Public Hearings: December 2010 • Final Regional Haze FIP, Summer 2011 • Compliance required, Summer 2016 • Cost Impact • ~$585M Units 1-3 (baghouses + SCR) • ~$75M Units 4-5 (APS current share) • ~$240M Units 4-5 (SCE share)

  5. Environmental Considerations - Ash Issues In June 2010 EPA proposed a rule to regulate ash as either non-hazardous waste or hazardous waste; Either proposal will phase out the use of ash ponds for the disposal of ash Status The public comment period ends on November 19, 2010 Timing Final rule expected in mid 2012 Implementation could begin within six months following the rule. Certain disposal requirements may not be required for two to five years Cost Impact

  6. Environmental Considerations - Mercury Issues EPA will be requiring mercury reductions from coal fired power plants Status EPA is gathering technical information to be used in writing these requirements; Four Corners has submitted their input Timing Proposed mercury rule, late 2010 Final mercury rule, late 2011 Compliance will be required by late 2014 Cost Impact ~$235M Units 1-3 (baghouses, included in BART values) Units 4-5 are not impacted by this rule

  7. APS Four Corners Proposal • Purchase SCE’s share of Units 4 & 5 • Retire Units 1,2 & 3 • Benefits of the proposal: 1) Good for APS customers • Low-cost generating resource • Maintains a diverse portfolio 2) Good for the community • Preserves jobs & tax revenue for the Navajo Nation and local community 3) Good for the environment • Significant emissions reductions…. lowers overall site emissions with no increased APS carbon risk • Proposal contingent upon ACC, CPUC, FERC approval, fuel agreement and lease renewal

  8. Resource Alternative Cost Comparison

  9. -500 -250 0 250 500 750 1000 1250 1500 APS Customer Benefit $488 NPV Savings ($M) CC Capital Cost1 $1,253/kW $750/kW $20/ton $0/ton CO2 Price2 $50/ton $5.75/mmBtu Gas Prices3 $7.50/mmBtu $4.00/mmBtu COST SAVINGS/BENEFITS • Combined cycle cost is for the generation only, i.e., excludes transmission • CO2 price shown is in 2013. Prices escalate at 2.5% per year over the study period • Gas prices shown are in 2015 $/MMBtu. Sensitivity represents +/- 30% stress test

  10. Portfolio Diversity COAL 14%

  11. Community Benefits $100M $20M $65M $40M Total $225M Four Corners & BHP Navajo Mine (annually): • Payroll • Local Vendor Support • Taxes, fees, & royalties to Navajo Nation • State, local, and federal taxes Employees Native American hiring preference at Four Corner Power Plant and BHP Navajo Mine Four Corners contributes to over 1/3 of the Navajo Nation General Fund

  12. Site Emission Reductions w/ Approval

  13. Closing Comments • The APS proposal is advantageous. It provides: • Benefits to our customers….lowest cost resource alternative • Benefits to the community….preserving jobs & tax revenue • Benefits to the environment…. lowers overall site emissions

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